The blueprint to a low-carbon construction industry

The volume of construction output worldwide is projected to grow by 85 percent by 2030. This presents a dual challenge to the global construction industry. It has to meet both increasing demand and mitigate the increasing political, regulatory and financial risk as global commitments on climate change create mounting pressure on operating costs and profit margins.

While it is clear that new products, processes and breakthrough technologies are in the pipeline, companies need to be sure that any action they are taking to cut their emissions is ambitious enough.

They can do this by setting science-based targets to cut greenhouse gas emissions across their value chains. These are targets designed to align emissions cuts with climate science, but they are also designed to be feasible to achieve by taking into account what is commercially viable and technically realistic.

Committed companies

Twenty-four companies from construction-related sectors, including real estate, construction materials, building products and construction, and engineering have committed to set science-based targets as of April 26. They are responsible for about 34 megatons of CO2 equivalent Scope 1 emissions, as well as around 5 megatons of CO2 equivalent Scope 2 emissions, yearly. In total, this is equivalent to the emissions produced by over 8 million cars being driven in a year.

Science-based target setting provides a powerful signal to investors that the business is taking a long-term approach to future-proof value creation and competitiveness.

Of these, two companies — Host Hotels and Resorts and Land Securities — have had their targets approved by the Science Based Targets initiative. These companies have a clear picture of how much and how quickly they need to reduce their greenhouse gas emissions. For instance, Host Hotels & Resorts commits to reducing their Scope 1 and 2 emissions on an emissions per square foot basis 28 percent by 2020 from a 2008 base-year.

Setting a foundation

Science-based target setting provides a powerful signal to investors that the business is taking a long-term approach to future-proof value creation and competitiveness. The targets also act as a catalyst for innovation. In the construction industry, the approach could be through designs that reduce the need for heavy machinery, use of cement alternatives or timber-frame high rise buildings. In addition, target setting gives companies the chance to get ahead of inevitable regulation around reducing emissions.

According to Tom Byrne, energy manager of Land Securities, having an approved science-based target has had an impact throughout the company’s operations. He said:

We consider the impact on our target of introducing a new building to our portfolio and take requisite measures to address any issues. We are also now deliberately designing and developing buildings in a way that aligns with our agreed decarbonization pathway and energy goals. Finally, we’re making sure that the buildings we manage are as energy efficient as possible, without compromising on affordability for our clients.

Investments we make need to pay off quickly and not result in large costs being passed on to customers. This means that rather than changing everything in a building, we focus on assets that need replacing or upgrading, and then choose the most energy-efficient replacements that are also cost-comparable over a reasonably short period of time.

Targets improve relations with investors

Andy Howard is head of sustainable research at Schroders, a global asset manager with about $483 billion of assets under management and offices in 27 countries. It is a mainstream investor focused on creating long-term value for its clients.

Howard said, "We want to know how exposed a particular business is to the changing context on climate and what it is practically doing to make the changes required; including its targets, timeframes and the extent of its ambition."

Byrne said Land Securities’ target had "undoubtedly" enhanced its reputation with investors: "We are now an even better long-term investment prospect. As long as we keep updating it in line with the latest science, our target future-proofs us for investor requirements for the next 50 years."

Challenges and opportunities

Many overall emissions caused by the construction sector are embedded in the value chain within the manufacture of commonly used construction materials such as aluminum, cement and steel, along with the use of heavy machinery. Transportation is also a major factor, given the need to get materials from suppliers to the construction site. Companies also need to consider the use phase of the building through electrifying heating-cooling systems and sourcing zero-carbon electricity.

As long as we keep updating it in line with the latest science, our target future-proofs us for investor requirements for the next 50 years.

Setting a science-based target can provide a leadership platform for companies to engage throughout their supply chain and beyond. Using the shared nature of the challenge around sustainable construction can create common cause with policymakers, customers, urban planners and NGOs, giving companies a strategic and commercial advantage in key markets.

Improving methods for target setting

Currently, construction companies can use the Science-Based Target's Sectoral Decarbonization Approach (PDF) model for "other industry" or the linear decarbonization approach for absolute emissions, which follows a linear pathway to 49 to 72 percent emission reductions by 2050.

The Science-Based Targets initiative also would like to partner with construction companies in developing more sophisticated, nuanced pathways for setting targets. To join the effort, visit the link to the Sectoral Decarbonization Approach above.